Every day this week the indices have opened on an upbeat note and then sold off. Once again this morning there was a gap up open and a quick pullback. China trade negotiations received the credit for the strong open but there wasn't much substance to the news this time.
The market is drifting down a bit as it awaits the open of the Lyft (LYFT) IPO. There is lot of speculation as to how it is going to trade but I'm seeing little desire to buy it as a long term investment out of the gate. If you are interested in trading it the best approach is to wait at least 30 minutes to an hour after it opens and watch for a trading range to develop. Use the bottom of the range as a stop out point and the top of the range as a possible buy trigger. The trading range provides a mechanism for risk control and nothing more. Valuation and all the other issues that are being discussed are secondary to the price action.
Late in the day there is likely to be some allocation trades into or out of bonds and into or out of equities. There is no way to know what the magnitude of these trades will be but they can have a major impact on the action. There are simply a function of expectations about interest rates and are not dependent on technical conditions. If you are trading the indices you will be at the mercy of those programs.
I'm inclined to put on index shorts to catch the pattern of intraday weakness but that is going to be impacted by Lyft. Once that starts to trade we'll have better insight into the market mood.
I'm seeing some good action in biotechnology stocks today such as Amarin (AMRN) , Viking (VKTX) and Zogenix (ZGNX) . Also names like Bloom Energy (BE) and StoneCo (STNE) are acting better. It may be related to the quarter end so I'll likely do some selling into strength but it is positive action and the stocks are not extended.
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